Oil and Gas Development in Texas

Texas is the second most populous and second largest state of the United States of America. Geographically located in the south central part of the country, Texas shares an international border with the Mexican states of Chihuahua, Coahuila, Nuevo León, and Tamaulipas to the south and borders the U.S. states of New Mexico to the west, Oklahoma to the north, Arkansas to the northeast, and Louisiana to the east. Texas has an area of 268,820 square miles (696,200 km2) and a growing population of over 26.9 million residents (July 2014).

The known petroleum deposits of Texas are about 8 billion barrels (1.3×10⁹ m³), which makes up approximately one-third of the known U.S. supply. Texas has 4.6 billion barrels (730,000,000 m³) of proven crude oil reserves. As wells are depleted in the eastern portions of the state, drilling in state has moved westward. Several of the major oil companies have headquarters in Texas, including ConocoPhillips, Marathon Oil (Houston), Exxon-Mobil (Irving), Tesoro, and Valero (San Antonio).

Texas is a global leader in the energy industry and Houston is the energy capital of the world. Since 2003, Texas state officials have created various initiatives like the Texas Enterprise Fund and the Texas Emerging Technology Fund to develop the economy of Texas. Texas is home to many of the world's largest oilfield services firms including Halliburton, Schlumberger and Dresser. The state has a number of pipeline operators, such as El Paso and Dynegy, along with diversified energy firms such as TXU and Reliant Energy.

History

Texas Oil Boom

The Texas oil boom, sometimes called the gusher age, was a period of dramatic change and economic growth in the U.S. state of Texas during the early 20th century that began with the discovery of a large petroleum reserve near Beaumont, Texas. The find was unprecedented in its size and ushered in an age of rapid regional development and industrialization that has few parallels in U.S. history. Texas quickly became one of the leading oil producing states in the U.S., along with Oklahoma and California; soon the nation overtook the Russian Empire as the top producer of petroleum. By 1940 Texas had come to dominate U.S. production. Some historians even define the beginning of the world's Oil Age as the beginning of this era in Texas.

The major petroleum strikes that began the rapid growth in petroleum exploration and speculation occurred in Southeast Texas, but soon reserves were found across Texas and wells were constructed in North Texas, East Texas, and the Permian Basin in West Texas. Although limited reserves of oil had been struck during the 19th century, the strike at Spindletop near Beaumont in 1901 gained national attention, spurring exploration and development that continued through the 1920s and beyond. Spindletop and the Joiner strike in East Texas, at the outset of the Great Depression, were the key strikes that launched this era of change in the state.

This period had a transformative effect on Texas. At the turn of the century, the state was predominantly rural with no large cities. By the end of World War II, the state was heavily industrialized, and the populations of Texas cities had broken into the top 20 nationally. The city of Houston was among the greatest beneficiaries of the boom, and the Houston area became home to the largest concentration of refineries and petrochemical plants in the world. The city grew from a small commercial center in 1900 to one of the largest cities in the United States during the decades following the era. This period, however, changed all of Texas' commercial centers and developed the Beaumont/Port Arthur area, where the boom began.

Post-Boom

By the 1940s, production in the East Texas Oil Field and oil prices stabilized. Though the major urban areas continued to grow, the extreme growth patterns of the first three decades began to slow. As western Texas and the panhandle region began to be more fully explored, the Permian Basin gradually became the top producing area of the state.

During the 1960s and 1970s, as a result of both production peaks in some nations and political instability in others, the world's supply of petroleum tightened leading to an energy crisis during the 1970s and early 1980s. Petroleum prices rose dramatically, greatly benefiting Texas, particularly as compared to other parts of the U.S. that faced recession during this time. A new economic boom emerged which, though not as transformative as the early 1900s, pushed the population of Texas to the point that, by the end of the century, Texas was the second most populous state in the nation. Some sources, in fact, use the phrase Texas oil boom to refer to this later period rather than the earlier period that followed Spindletop.

Recent Developments

Ever since the discovery of oil at Spindletop, energy has been a dominant force politically and economically within the state. If Texas were its own country it would be the sixth largest oil producer in the world.

Barnett Shale and the Development of Unconventional Natural Gas

See Main Page: Barnett Shale

The Barnett Shale is a geological formation located in the Bend Arch-Fort Worth Basin. It consists of sedimentary rocks dating from the Mississippian period (354–323 million years ago) in Texas. The formation underlies the city of Fort Worth and underlies 5,000 mi² (13,000 km²) and at least 17 counties.

As of 2007, some experts suggested that the Barnett Shale might have the largest producible reserves of any onshore natural gas field in the United States. The field is thought to have 2.5×10^¹² cu ft (71 km³) of recoverable natural gas, and 30×10^¹² cu ft (850 km³) of natural gas in place. Oil also has been found in lesser quantities, but sufficient (with high oil prices) to be commercially viable.

The Barnett Shale is known as a "tight" gas reservoir, indicating that the gas is not easily extracted. The shale is very impermeable, and it was virtually impossible to produce gas in commercial quantities from this formation until oil and gas companies learned how to effectively use massive hydraulic fracturing in the formation. The use of horizontal drilling further improved the economics, and made it easier to extract gas from under developed areas.

Future development of the field will be hampered in part by the fact that major portions of the field are in urban areas, including the rapidly growing Dallas-Fort Worth Metroplex. Some local governments are researching means by which they can drill on existing public land (e.g., parks) without disrupting other activities so they may obtain royalties on any minerals found, whereas others are seeking compensation from drilling companies for damage to roads caused by overweight vehicles (many of the roads are rural and not designed for use by heavy equipment). In addition, drilling and exploration have generated significant controversy because of environmental damage including contamination to the ground water sources.

Railroad Commission of Texas

Main Article:Railroad Commission of Texas

The Railroad Commission of Texas (RRC; also sometimes called the Texas Railroad Commission, TRC) is the state agency that regulates the oil and gas industry, gas utilities, pipeline safety, safety in the liquefied petroleum gas (LPG) industry, and surface coal and uranium mining. Despite its name, it no longer regulates railroads.

Established by the Texas Legislature in 1891, it is the state's oldest regulatory agency and began as part of the Efficiency Movement of the Progressive Era. From the 1930s to the 1960s it largely set world oil prices, but was displaced by OPEC (Organization of Petroleum Exporting Countries) after 1973. In 1984, the federal government took over transportation regulation for railroads, trucking and buses, but the Railroad Commission kept its name. With an annual budget of $79 million, it now focuses entirely on oil, gas, mining, propane, and pipelines, setting allocations for production each month.